♻️KNOW THE PROCESS♻️

Question 1

What’s the first step in the CRE deal process?

Answer 1

1. Find an off market deal
   * engage with the seller, get his motivation for selling, build a connection.
   * obtain property income+expenses, rent roll, schedule E.
   *Ask how much he owes on the property and how long he’s owned it.

Question 2

What’s the second step in the CRE transaction process?

Answer 2

2. After you’ve identified an off market deal and got the numbers THEN, you analyze the deal and the market.
   * Calculate the property’s market value, DSCR, Cap Rate, CoC, etc.
   * Get the sales comps, and the rent comps, market cap rate, and an on-site visit.
   * Lastly, make a “go” or “no go” decision.

Question 3

After you’ve analyzed a deal what comes next?

Answer 3

3. You extend an offer via a Purchase Contract, or an LOI (Letter of Intent |non-legally binding).
   * When you do this you’re handling the counter offers (KNOW YOUR STUFF, KNOW THE #’s)
   * if offer accepted/negotiated (congrats ;) ) move on if stalemate move to the next deal and follow up later down the line.

Question 4

Congrats, your LOI/Contract is accepted and signed by the seller, what’s next?

Answer 4

4. Begin conducting the Due Diligence period (Inspection Period).
   * PHYSICAL: walk through, get repair estimates (there are no consumer protection laws in CRE like residential, so you gotta know what you’re buying), check competition.
   * FINANCIAL: Applying for the loan, examine income + expenses, deep analysis. THIS IS WHERE YOU HAVE A KEY UPPER HAND. YOU ARE ABLE TO CLOSE ON A LOAN WITHIN 1 WEEK (7 days) WHERE MOST BUYERS WOULD NEED 30-45 DAYS TO CLOSE ON THEIR LOAN. 4X-6X FASTER THAN ANYONE! The most money, the fastest… at the best fixed interest rates and non recourse 🤝🏾
   * LEGAL: check title, form LLC’s, syndication docs (if applicable) THIS IS ALSO WHERE YOU HAVE THE UPPER HAND BECAUSE MANY PEOPLE NEED MULTIPLE INVESTORS TO MAKE A DEAL HAPPEN YOU NEED ONLY 1 IF THAT OR HAVE THE SELLER PUT DOWN FOR IT TO CLOSE.
   * Lastly, interview your property managers.

Question 5

Once all the inspections and due diligence are done, what’s next?

Answer 5

5. Decide if it’s a green light or a no go!
   * do you still like the deal after DD and what your loan terms will be?
   * If not renegotiate a new LOI or Purchase Contract based on the numbers and property condition for a NEW “win-win”

Question 6

So you’ve got the green light after due diligence! Congrats, now what?

Answer 6

6. Now you prepare for closing!
   * finalize the loan (is the appraisal done), do you have clear loan conditions?
   * finalize your property manager agreement.
   * create an operation budget and capex (capital expenditures) schedule. IE how much money will be going in and out.
   * finalize your plan/asset management (goals/ideal milestones)
   * wiring the down payment funds! (If needed)

Question 7

It’s closing day! What do you do?

Answer 7

You’ll have a 1-2 inch thick pile of papers to sign/initial with your attorney and they will explain exactly what you’re signing. NOW YOU CELEBRATE! 🥳

Question 8

What are your next steps “post-close”?

Answer 8

8. This is where the $$$ is made (Asset Management + value adds)
   * Work with the property manager and contractors on starting improvements.
   * Execute your value add/renovation program. (Discipline/Consistency)

Question 9

What’s next once you’ve got your value-add and renovation program going?

Answer 9

9. Reporting and accounting (how empires are built)
   * Understand the financials behind the 4 M’s: management, money, marketing, and maintenance.
   * Brilliant tax planning can and will change your financial life.

Question 10

What is the last step of the transaction journey?

Answer 10

THE EXIT! (Experience the fruits of your labor)
Do you want to:
* Cash-out refinance?
* Long-term hold for retirement?
* 1031 exchange with into a larger property?
* Sell and retire? (Or keep going)

It’s extremely important to know and understand these options for yourself but more importantly why your seller would want of these options. When you’re closing deals these are there pathways and you need to know the advantages and disadvantages of each to be able to guide them to the option that will best suit you AND him. (You’ll help him understand why)

Question 11

Can you list all the steps of a CRE transaction in order?

Answer 11

1. Find an off-market deal
2. Analyze the deal
3. Put together your LOI or Purchase Contract
4. Engage the Due Diligence/Inspection Period
5. Check in if you want to do the deal still or renegotiate based on reports and loan terms.
6. Prepare for the close
7. Closing day!
8. Post closing activities: Renovation/Management plan with GM and Contractor.
9. Tax planning/Accounting/Reporting
10. Exiting! (Cash out refi, hold, sell, or 1031 exchange)